Z. Short-run supply and long-run equilibriumConsider the competitive market for steel. Assume that, regardless of how many firms are in the industry, every firm in the industry is identical andaces the marginal cost (MC), average total cost (ATC), and average variable cost (AVC) curves shown on the following graph.100908070605040АТC3020AVCМС10005101520253035404550QUANTITY (Thousands of tons)COSTS (Dollars per ton) Assignment 8 (Ch 14).10090Supply (20 firms)8070Supply (30 firms)Supply (40 firms)Demand30201000.1252503755006257508751000 1125 1250QUANTITY (Thousands of tons)If there were 20 firms in this market, the short-run equilibrium price of steel would be $per ton. At that price, firms in this industry would. Therefore, in the long run, firms wouldthe steel market.Because you know that competitive firms earneconomic profit in the long run, you know the long-run equilibrium price must beper ton. From the graph, you can see that this means there will befirms operating in the steel industry in long-run equilibrium.True or False: Assuming implicit costs are positive, each of the firms operating in this industry in the long run earns positive accounting profitTrueFalsePRICE (Dollars per ton)

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Asked Oct 28, 2019
Z. Short-run supply and long-run equilibrium
Consider the competitive market for steel. Assume that, regardless of how many firms are in the industry, every firm in the industry is identical and
aces the marginal cost (MC), average total cost (ATC), and average variable cost (AVC) curves shown on the following graph.
100
90
80
70
60
50
40
АТC
30
20
AVC
МС
10
0
0
5
10
15
20
25
30
35
40
45
50
QUANTITY (Thousands of tons)
COSTS (Dollars per ton)
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Z. Short-run supply and long-run equilibrium Consider the competitive market for steel. Assume that, regardless of how many firms are in the industry, every firm in the industry is identical and aces the marginal cost (MC), average total cost (ATC), and average variable cost (AVC) curves shown on the following graph. 100 90 80 70 60 50 40 АТC 30 20 AVC МС 10 0 0 5 10 15 20 25 30 35 40 45 50 QUANTITY (Thousands of tons) COSTS (Dollars per ton)

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Assignment 8 (Ch 14).
100
90
Supply (20 firms)
80
70
Supply (30 firms)
Supply (40 firms)
Demand
30
20
10
0
0.
125
250
375
500
625
750
875
1000 1125 1250
QUANTITY (Thousands of tons)
If there were 20 firms in this market, the short-run equilibrium price of steel would be $
per ton. At that price, firms in this industry would
. Therefore, in the long run, firms would
the steel market.
Because you know that competitive firms earn
economic profit in the long run, you know the long-run equilibrium price must be
per ton. From the graph, you can see that this means there will be
firms operating in the steel industry in long-run equilibrium.
True or False: Assuming implicit costs are positive, each of the firms operating in this industry in the long run earns positive accounting profit
True
False
PRICE (Dollars per ton)
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Assignment 8 (Ch 14). 100 90 Supply (20 firms) 80 70 Supply (30 firms) Supply (40 firms) Demand 30 20 10 0 0. 125 250 375 500 625 750 875 1000 1125 1250 QUANTITY (Thousands of tons) If there were 20 firms in this market, the short-run equilibrium price of steel would be $ per ton. At that price, firms in this industry would . Therefore, in the long run, firms would the steel market. Because you know that competitive firms earn economic profit in the long run, you know the long-run equilibrium price must be per ton. From the graph, you can see that this means there will be firms operating in the steel industry in long-run equilibrium. True or False: Assuming implicit costs are positive, each of the firms operating in this industry in the long run earns positive accounting profit True False PRICE (Dollars per ton)

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Expert Answer

Step 1

In the graph, demand curves for 20(orange) and 30(purple) firms are drawn. It is used for reference.

100
90
Supply (20 fierms)
80
70
Supply (30 firms)
50
40
Supply (40 firms)
Demahd
30
20
10
125 250 375 500 625 750 875 1000 1125 1250
QUANTITY (Thousands of tons)
PRICE (Dollars per ton)
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100 90 Supply (20 fierms) 80 70 Supply (30 firms) 50 40 Supply (40 firms) Demahd 30 20 10 125 250 375 500 625 750 875 1000 1125 1250 QUANTITY (Thousands of tons) PRICE (Dollars per ton)

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Step 2

If there were 20 firms in this market, the short-run equilibrium price of steel would be $ 40 (refer graph) per ton. At that price, firms in this industry would operate at a positive profit (as ATC curve is below the price). Therefore, in the long run, firms would enter (as there are positive profits) the steel market.

Step 3

Because you know that perfectly competitive firms earn zero economic profit in the long run, you know the long-run equilibrium price must be $ 30 (where ATC is at its minimum) per ton. F...

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